Permal, Canyon Vets Prep Distressed Funds

Jan 26 2009 | 2:12am ET

Newly-formed Fides Capital Management is gearing up to launch a distressed private equity real estate fund to invest in properties overlooked by institutional investors. The firm also has an “all-inclusive” distressed opportunities hedge fund in the offing for later this year.

The Fides Real Estate Direct Lending & Distressed Opportunity Fund seeks to take advantage of current market conditions by making opportunistic equity investments in distressed real estate assets and loans directly secured by real estate assets that have been devalued in the marketplace due to a dearth of capital and current economic conditions, according to a fund presentation.

The fund will also focus on properties in the marketplace that institutional funds typically ignore, such as deals that do not meet minimum investment requirements, or non-institutional real estate asset classes (Class B and C properties) and stalled real estate projects.

“We’re seeing a number of residential deals in foreclosure where banks need someone to step in and take over the development,” said José Quesada, principal and former vice president of the Canyon-Johnson Urban Fund, a joint venture between Canyon Capital Advisors and basketball great Earvin “Magic” Johnson. “This is a niche play on properties that institutional funds are overlooking, and it requires qualitative assessment that isn't quite apparent to the naked eye.”

Quesada said that the Pasadena, Calif.-based firm is looking to raise between $150 million and $300 million for its maiden fund, which will primarily focus on West coast properties.

“The kinds of deals we’re looking at right now are trading at steep attractive discounts. In the past, properties at 50 cents to 60 cents on the dollar were a great trade, but now 30 cents to 40 cents on the dollar is a great trade,” he said.
  
Fides is also prepping a distressed hedge fund for future launch.

The other principals of the firm include Hagop Sargisian, a real estate developer, and Tim Bello, a former member of the Permal Group’s U.S. operation.


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